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Banco BTG Pactual S.A.

PRI reporting framework 2019

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ESG incorporation in actively managed listed equities

Implementation processes

LEI 01. Percentage of each incorporation strategy

01.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
30 %
Percentage of active listed equity to which the strategy is applied
30 %
Percentage of active listed equity to which the strategy is applied
40 %
Total actively managed listed equities 100%

01.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

Our investment philosophy demands a deep understanding of both operations and strategic initiatives of all companies we invest in. Our fundamental approach drives us to investigate the governance structure, natural resource dependency and social approach of portfolio companies. All this information is taken into account during our decision making process.

Companies are monitored closely and analysts have to demonstrate a thorough knowledge of the company and sector, obtained through market research, conversations with senior management of the company and its competitors, detailed valuation models, and comparisons with global peers when applicable. 

Our team is constantly analyzing the changes and tendencies of ESG factors which could impact invested sector or the targeted companies and are prepared to include in all financial analysis ESG factors.

Also, following the corporate guideline of not investing in some pre-determined sectors and companies, our team excludes from all samples such sectors/company. 

Finally, the targeted sectors and companies are compared to local and global peers in order to find which one has the best processes and culture.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

The analysts thoroughly study the fund’s investment universe and conduct a detailed selection and monitoring process. Key drivers of this process are the investment pillars, which are based on conviction, knowledge and quality companies. Therefore, ESG Factors are embedded when analyzing and selecting the investment universe. Additionally, the team selects companies with strong management, which is a key factor because the investment team needs to trust that the companies’ management is capable of implementing turn around plans if an adverse situation arises from ESG issues. 


LEI 02. Type of ESG information used in investment decision (Private)


LEI 03. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Following our investment policy, our analysts exclude companies that do not match our ESG expectations from the pool of possible investments.

Screened by

Description

Our analysts seek for ESG practices amongst peers to identify companies with best practices, taking into account raw data and historical evolution.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

The analysts follow closely the activities of the companies they cover and make sure to be involved on different levels of activities. For example, the team is often involved in the environmental behaviors of invested companies. The team has visited the company’s mining operations in key countries, including its mining, smelter and refining facilities. Additionally, in April 2014, the team participated in the company’s public audience for the development of their expansion project. The event provided the team and other attendees with detailed information of the environmental repercussions of the project as well as any other requested information. This resulted gave the team a positive perception regarding the expansion and the company and reassured their investment decision.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

Our analysts conduct all the reviews and researches based on the data provided by the company. After all quantitative and qualitative review, our team meets with the targeted companies to ensure that there is no information gap in the reviews conducted and the company reality.

BTG Pactual lanched the first ESG Equity Fund in Chile market. The fund uses as benchmark the MSCI ESG Chile Index and prior to decision making process our analysts uses researches provided by both services providers MSCI and Vigeo. MSCI provides ESG rating on a quarterly basis and Vigeo provides ESG research on an annually basis. 


LEI 06. Processes to ensure fund criteria are not breached (Private)


(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

Our PMs area aware that exposure to stock market movements in a single country may be significantly affected by political or economic developments, government action or natural events that do not affect a fund investing in broader markets. We incorporate political risks in our evaluation process of individual companies, and try to assess how each company is either directly exposed to political events (i.e. companies in which a government has a significant stake) or is in a sector exposed to political events (i.e. regulated sectors).

Risk management is fundamental to our investment approach. We manage risk from a qualitative perspective through: deep understanding of operating activities, constant interaction with management, avoiding excessive company, market cap and sector concentrations and adjust positions according to liquidity, among others. From a quantitative perspective, risk is monitored and managed daily by and independent risk team with the use of tools and reports, such as VaR, Stress tests, Scenario & sensitivity analysis, Factor risk analysis, Concentration limits, Liquidity and capitalization analysis and Performance attribution.

The team prepares daily reports and has constant interaction with the PM and traders on risk levels.


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information.[Optional]

BTG Pactual lanched the first ESG Equity Fund in Chile market. The fund uses as benchmark the MSCI ESG Chile Index and prior to decision making process our analysts uses researches provided by both services providers MSCI and Vigeo. 


LEI 10. Aspects of analysis ESG information is integrated into (Private)


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